Why Glu Mobile Inc. Shares Tumbled Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Glu Mobile (NASDAQ: GLUU) fell nearly 11% Friday after the mobile games specialist announced a new secondary offering of 8.575 million shares.

So what: Glu Mobile priced the offering at $3.50 per share this morning -- or a nearly 14% discount to yesterday's close -- so it'll gross around $30 million. Of that, Glu expects to net roughly $27.8 million, which it plans to use for working capital and other general corporate purposes, "including the acquisition of, or investment in, companies, technologies, products or assets that complement Glu's business."

Now what: Glu Mobile hasn't been shy about making acquisitions. In fact, it kicked off this month with a 10% pop thanks both to its solid first-quarter results and an agreement to acquire DASH series game-maker PlayFirst for 3 million shares of common stock. Still, the stock had already given up nearly all of its post-earnings gains going into yesterday's close, and today's pullback is certainly understandable given the additional dilution that comes with the offering.

That's not to say Glu Mobile can't put its freshly filled coffers to good use if it has another promising acquisition target in mind, but I'm personally still skeptical of the economics behind the free-to-play game space. For now, while this could be a great opportunity for bullish investors to open or add to a position, I'm opting to stay on the sidelines.

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